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The links between economic growth and tax revenue in Ghana: an empirical investigation

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  • Wisdom Takumah
  • Bernard Njindan Iyke

Abstract

This paper explores the causal influence of tax revenue on economic growth in Ghana. The causality analysis builds on a multivariate setup, allowing for key control variables to intermediate the nexus between tax revenue and economic growth. This enables the paper to overcome variable omission bias, allowing for efficient estimates of the test statistics of the Granger causality. In addition, the paper employs the Toda-Yamamoto test instead of the conventional Granger causality test to avoid pre-testing bias. Using a quarterly dataset which spans the period 1986Q1-2014Q4, we find strong evidence of unidirectional causal flow from tax revenue to economic growth in Ghana. This finding agrees with the existing finding that taxation can influence economic growth. The implication for policy is that the tax scope of the country should be expanded in order to increase the revenue from taxation.

Suggested Citation

  • Wisdom Takumah & Bernard Njindan Iyke, 2017. "The links between economic growth and tax revenue in Ghana: an empirical investigation," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 9(1), pages 34-55.
  • Handle: RePEc:ids:ijsuse:v:9:y:2017:i:1:p:34-55
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    Citations

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    Cited by:

    1. Ho, Sin-Yu & Njindan Iyke, Bernard, 2018. "The Determinants of Economic Growth in Ghana: New Empirical Evidence," MPRA Paper 87123, University Library of Munich, Germany.
    2. Sin-Yu Ho, 2018. "Analysing the sources of growth in an emerging market economy: the Thailand experience," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 10(4), pages 340-359.
    3. Bakari, Sayef, 2018. "If France continues this strategy, taxes will destroy domestic investment and economic growth," MPRA Paper 88944, University Library of Munich, Germany.
    4. Ho, Sin-Yu, 2017. "The Macroeconomic Determinants of Stock Market Development: Evidence from Malaysia," MPRA Paper 77232, University Library of Munich, Germany.
    5. repec:taf:wjabxx:v:18:y:2017:i:3:p:380-392 is not listed on IDEAS
    6. Ho, Sin-Yu & Njindan Iyke, Bernard, 2017. "Does Financial Development Lead to Poverty Reduction in China? Time Series Evidence," MPRA Paper 78922, University Library of Munich, Germany.
    7. Bernard Njindan Iyke & Sin-Yu Ho, 2017. "The Real Exchange Rate, the Ghanaian Trade Balance, and the J-curve," Journal of African Business, Taylor & Francis Journals, vol. 18(3), pages 380-392, July.
    8. Bakari, Sayef, 2018. "If France continues this strategy, taxes will destroy domestic investment and economic growth," MPRA Paper 88943, University Library of Munich, Germany.

    More about this item

    Keywords

    causality; economic growth; tax revenue; Ghana; Toda-Yamamoto test.;

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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